HF 3776

as introduced - 86th Legislature (2009 - 2010) Posted on 04/13/2010 10:13am

A bill for an act
relating to education; authorizing charter schools to borrow money; creating
obligations for debt repayment; amending Minnesota Statutes 2008, sections
126C.52, by adding a subdivision; 126C.53; proposing coding for new law in
Minnesota Statutes, chapter 126C.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2008, section 126C.52, is amended by adding a
subdivision to read:

new text begin Subd. 4. new text end

new text begin Charter schools. new text end

new text begin (a) The board of a charter school may borrow money in
the manner and subject to the limitations in sections 126C.53 and 126C.57 in anticipation
of the receipt of:
new text end

new text begin (1) state aids for schools as defined in Minnesota Statutes; and
new text end

new text begin (2) federal school aids to be distributed by or through the Department of Education.
new text end

new text begin (b) The aggregate borrowing under this subdivision shall not exceed 75 percent of
such aids, fees, and tuition payments which are receivable by the charter school in the fiscal
year in which the money is borrowed, as estimated and certified by the commissioner.
new text end

Sec. 2.

Minnesota Statutes 2008, section 126C.53, is amended to read:

126C.53 ENABLING RESOLUTION; FORM OF CERTIFICATES OF
INDEBTEDNESS.

The board of a school district new text begin , charter school, new text end or intermediate school district may
authorize and effect such borrowing, and may issue such certificates of indebtedness upon
passage of a resolution specifying the amount and purposes for which it deems such
borrowing is necessary. The resolution must be adopted by a vote of at least two-thirds
of its members. The board must fix the amount, date, maturity, form, denomination, and
other details of the certificates of indebtedness, not inconsistent with this chapter. The
board must fix the date and place for receipt of bids for the purchase of the certificates
when bids are required and direct the clerk to give notice of the date and place for bidding.

Sec. 3.

new text begin [126C.551] STATE PAYMENT OF CHARTER SCHOOL DEBT
OBLIGATION UPON POTENTIAL DEFAULT; REPAYMENT; STATE
OBLIGATION NOT DEBT.
new text end

new text begin Subdivision 1. new text end

new text begin Definition. new text end

new text begin For the purposes of this section, the term "debt
obligation" means a certificate of indebtedness issued under section 126C.52.
new text end

new text begin Subd. 2. new text end

new text begin Notification; payment; appropriation. new text end

new text begin (a) If a charter school believes
that it may be unable to make a principal or interest payment on any outstanding debt
obligation on the date that payment is due, it must notify the commissioner as soon as
possible, but not less than 15 working days before the date that principal or interest
payment is due. The notice must include the name of the charter school, an identification
of the debt obligation issue in question, the date the payment is due, the amount of
principal and interest due on the payment date, the amount of principal or interest that the
charter school will be unable to repay on that date, the paying agent for the debt obligation,
the wire transfer instructions to transfer funds to that paying agent, and an indication as to
whether a payment is being requested by the charter school under this section. If a paying
agent becomes aware of a potential default, it shall inform the commissioner of that fact.
After receipt of a notice which requests a payment under this section, after consultation
with the charter school and the paying agent, and after verification of the accuracy of the
information provided, the commissioner shall notify the commissioner of management
and budget of the potential default. The notice must include a final figure as to the amount
due that the charter school will be unable to repay on the date due.
new text end

new text begin (b) Upon receipt of this notice from the commissioner, the commissioner of
management and budget shall issue a warrant and authorize the commissioner of education
to pay to the paying agent for the debt obligation the specified amount on or before
the date due. The amounts needed for the purposes of this subdivision are annually
appropriated to the department from the state general fund.
new text end

new text begin (c) The Departments of Education and Management and Budget must jointly
develop detailed procedures for charter schools to notify the state that they have obligated
themselves to be bound by the provisions of this section, procedures for charter schools
and paying agents to notify the state of potential defaults and to request state payment
under this section, and procedures for the state to expedite payments to prevent defaults.
The procedures are not subject to chapter 14.
new text end

new text begin Subd. 3. new text end

new text begin Charter school bound; interest rate on state paid amount. new text end

new text begin If, at the
request of a charter school, the state has paid part or all of the principal or interest due on a
school's debt obligation on a specific date, the school is bound by all provisions of this
section and the amount paid shall bear taxable interest from the date paid until the date of
repayment at the invested cash rate as it is certified by the commissioner of management
and budget. Interest shall only accrue on the amounts paid and outstanding, less the
reduction in aid under subdivision 4 and other payments received from the school.
new text end

new text begin Subd. 4. new text end

new text begin Aid reduction for repayment. new text end

new text begin (a) Except as provided in this subdivision,
the state must reduce the state aid payable to the charter school under this chapter and
chapters 122A, 124D, 125A, and 126C by the amount paid by the state under this section
on behalf of the school, plus the interest due on it, and the amount reduced must revert
from the appropriate account to the state general fund. Federal aid payments shall not be
reduced.
new text end

new text begin (b) If, after review of the financial situation of the charter school, the commissioner
advises the commissioner of management and budget that a total reduction of aids would
cause an undue hardship on or an undue disruption of the educational program of the
school, the commissioner, with the approval of the commissioner of management and
budget, may establish a different schedule for reduction of aids to repay the state. The
amount of aids to be reduced is decreased by any amounts repaid to the state by the school
from other revenue sources.
new text end

new text begin Subd. 5. new text end

new text begin Mandatory plan; technical assistance. new text end

new text begin If the state makes payments
on behalf of a charter school under this section or the school defaults in the payment
of principal or interest on an outstanding debt obligation, it must submit a plan to the
commissioner for approval specifying the measures it intends to implement to resolve the
issues which led to its inability to make the payment and to prevent further defaults. The
department must provide technical assistance to the school in preparing its plan. If the
commissioner determines that a school's plan is not adequate, the commissioner shall
notify the school that the plan has been disapproved, the reasons for the disapproval, and
that the state shall not make future payment under this section for debt obligations issued
after the date specified in that notice until its plan is approved. The commissioner may
also notify the school that until its plan is approved, other aids due the school will be
withheld after a date specified in the notice.
new text end

new text begin Subd. 6. new text end

new text begin Continuing disclosure agreements. new text end

new text begin The commissioner of management
and budget may enter into written agreements or contracts relating to the continuing
disclosure of information needed to facilitate the ability of charter schools to issue debt
obligations according to federal securities laws, rules, and regulations. Such agreements
or contracts may be in any form the commissioner of management and budget deems
reasonable and in the state's best interests.
new text end